Homegrown digital gold platform SafeGold on Thursday launched a new leasing offering called ‘Gains’ which will allow consumers to lease individually owned gold. The company said that it will allow over 100 million retail gold consumers in the country to change their perspective on the precious metal, giving it a larger purpose of income generation rather than mere accumulation. Not only this, the new feature will also empower India’s underserved MSME jewellery industry.
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With the launch of Gains, SafeGold aims to mobilise idle gold so as to reduce imports by up to $526 billion at current gold prices over the long run. The company estimates that consumers in India have approximately 8,000 tons of idle gold coins, bars and unused jewellery.
The company said that the gold which gets leased out through the Gains platform can be sold immediately at the end of the lease tenure (typically between 3-6 months).
“Hence, it allows for greater liquidity over a shorter time frame, and control for investors over when they can withdraw, re-lease or even take delivery of their digital gold,” it said in a statement.
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In the long run, Gains stands to earn 14-17 per cent annually (based on an annualised price growth of 11 per cent on gold in the past 5 years) and expected yield (between 3-6 per cent).
SafeGold informed that the product shall be open only to holders of digital gold, to begin with. However, a doorstep pickup service for customers is expected to be rolled out shortly which will enable the utilisation of the country’s estimated 8,000 tonnes of household gold directly in the gold industry.
“There is potential for gold to be a strategic income-earning asset. At SafeGold, we want to empower consumers and jewellers alike to tap into India’s household gold reserves and reinvigorate gold as an asset class. This will potentially also reduce India’s dependence on gold imports while driving a structured and simplified gold metal lease offering for MSMEs,” SafeGold Founder and MD Gaurav Mathur said.
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How does it work?
MSME jewellers will be able to list their leases on the SafeGold platform once the jeweller has been thoroughly vetted for creditworthiness and KYC verified.
Jewellers listing their lease choose the yield rate and tenure they wish to offer and provide a bank guarantee covering at least 105 per cent of the value of the gold to be leased. In the event a jeweller defaults, SafeGold would enforce the bank guarantee on behalf of customers who have leased the gold.
Customers view the listed leases and commit at least 0.5 gm of their gold balance to the lease of their choice. SafeGold facilitates the lease by physically transferring the gold from the customer’s account to the jeweller’s account. At the end of the lease tenure, the jeweller settles the gold back to the vault, and SafeGold updates the customer balance. The company will be responsible for ensuring physical purity standards are maintained throughout this process. Customers have the option to re-lease, sell or take physical possession of their gold balance.
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For the period of the lease, customers cannot sell, exchange for jewellery or take delivery of their committed gold balance. Jewellers have the option of a flexible tenure lease where they settle the gold back before the maturity of the lease.
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Customer yield is calculated on a daily basis and accrues to their digital gold account each month. Yields are expected to be between 3-6 per cent (depending on jeweller choice and loyalty incentives offered by SafeGold).
